The Asean + 3 Macroeconomic Review Office (AMRO) is expecting the Asean + 3 nations to grow by 6.7% this year, ahead of the 6.0% it had predicted in April 2020.

The upgrade - which follows the 0.2% contraction in the region’s economy in 2020 – comes as the economies have been proven to be resilient in the face of the pandemic.

Still, the economies are not out of the woods yet, cautioned the macroeconomic watchdog which monitors Asean, China, Japan and Korea.

The region, which is home to 30% of the global population, presently accounts for some 3% of the total number of confirmed coronavirus cases. However, without herd immunity, the region’s economy may still be vulnerable to further impact from the pandemic.

“As governments become more experienced at handling infections, targeted measures that are decisive, effective, and proactive will allow economies to minimize further loss of lives while enabling economic activity to continue,” explains AMRO’s chief economist Khor Hoe Ee.

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Following this year’s 6.7% growth, Khor and his team expect the region’s growth to slow to 4.9% in 2022.

With the pandemic having an uneven impact across the region, AMRO cautions that the recovery remains fragile across sectors and economies.

Certain segments, such as manufacturing and exports, for instance are likely to rebound quickly thanks to the adoption of new technologies.

These sectors had initially felt the pressure from disrupted global value chains (GVCs), when the lockdowns were imposed.

However, Khor does not foresee these GVCs being reconfigured away from Asia anytime soon.

“Asia is still one of the fastest-growing regions in the world, and we know that proximity to high-quality infrastructure, skilled labour, and customers with purchasing power all matter for GVCs,” he elaborates.

Other sectors however, will feel the pressure to reinvent themselves to survive.

This will in turn affect employment prospects, with employees of certain in-person service industries and smaller businesses in the informal sector being most vulnerable.

However, one sector appears to be improving: the financials.

Markets have soared since 1Q2020, on the back of the unprecedented policy stimuli as well as the development – and more recently – roll out of the Covid-19 vaccines.

This, however, has brought on higher public debt.

Going forward, AMRO says that macro-financial policymaking will have to gradually shift from protecting lives and livelihoods to safeguarding an inclusive and sustainable recovery.

“Recovery is under way but is by no means assured. So, it is more important than ever to make sure that the momentum does not falter,” says Li Lian Ong, AMRO’s group head of
financial and regional Surveillance.

The watchdog suggests that policies should be gradual, coordinated and well-communicated so as to avoid “cliff effects”.